Human T-cell lymphotropic virus type I (HTLV-I) encodes a 40-kD nuclear transactivating phosphoprotein, Tax1. Through interaction with cellular transcription factors, Tax1 regulates the level of viral and cellular gene expression. To identify cellular transcription factors which Tax1 might regulate or directly interact with, regulatory proteins which bind specifically to the viral LTR and activate transcription have been investigated. Ets1 and Ets2 are sequence-specific transcriptional activators of the HTLV-I long terminal repeat (LTR). Tax1 and Ets increase expression from the HTLV-I promoter in a cooperative manner. The functional interaction between Tax1 and Ets1 required the presence of the Tax1 responsive 21-bp repeat element. Direct interaction of Ets1 with the 21-bp repeat gel shift complex was demonstrated. Furthermore, interaction of Ets1 with the 21-bp repeat binding proteins enhances the relative binding efficiency to DNA. In view of the high level expression of Ets1 in lymphocytes, the c-ets proto-oncogenes encode transcription factors which could play an important role in both basal and Tax1-mediated HTLV-I transcription. To further investigate the activation of HTLV-I transcription by Tax1, a chimeric protein containing Tax1 fused to the DNA binding domain of GAL4 was created (GAL4-Tax1). HTLV-I long terminal repeat (LTR) reporter plasmids were constructed in which specific Tax1 responsive elements were replaced with GAL4 binding sites. Cotransfection of GAL4-Tax1 or Tax1 with HTLV-I LTR reporter constructs containing GAL4 binding sites demonstrated that GAL4 sequences were necessary, but not sufficient, for maximal activation. Reporter constructs containing three GAL4 binding sites flanked by two 21-base pair repeat elements demonstrated a signifi- cantly greater response to GAL4-Tax1. These results suggest that the interaction of Tax1 with cellular transcription factors, which bind the 21-base pair repeat elements, influence the ability of Tax1 to function as a transactivator.